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What Are the BizJet Move-Up Dynamics?

What are the trends for business jet move-ups and brand loyalty among Business Aviation operators? Mike Chase studies the JETNET data…

Mike Chase   |   9th February 2018
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Mike Chase Mike Chase

Mike Chase has thirty-five year's extensive global managerial experience in marketing,...
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What are the trends for business jet move-ups and brand loyalty among Business Aviation operators? Mike Chase studies the JETNET data to determine…

 

As of November 2017, there were 479 Citation Mustangs built, 478 of which were still in operation. According to JETNET, there are 41 (or 8.6% of the fleet) ‘For Sale’. Indeed, an average eight new and used Mustangs have transacted per month over the past 12 months. This high monthly average is the second largest of all business jet models.

 

So what is going on at the bottom end of the Citation market? Since Textron announced it will cease production of Citation Mustangs, the entry-level point for Textron new business jet ownership became slightly higher. Of course, not every owner moves up, but what might be the upgrade path for those who do? Would they stay in the Cessna family of aircraft?

 

Recently, JETNET developed upgrade reports from its Evolution database for aircraft ownership, and there are two upgrade paths to view:

 

  • ‘Upgrade To’ Path (by make/model)
  • ‘Upgrade From’ Path (by make/model)

 

The ‘Upgrade To’ Path

As we consider the data contained in Table A specifically factoring owners of Citation Mustangs, an ‘Upgrade To’ Path can be identified as follows…

 

  • Of 389 recorded Citation Mustang sales, only 108 (27.8%) show an upgrade.
  • Of those 108 upgrades, the ‘Top Five’ models (all Citations) accounted for 61% of upgrades.
  • The Citation M2 was selected by 21 owners as the replacement aircraft.
  • Owners of 12 Citation Mustangs selected another Mustang business jet (because of the current aircraft’s age, new features available or better economics).

 

 

TABLE A - CESSNA CITATION MUSTANG OWNER'S LIKELY UPGRADE PATH
(per 11/30/17)

Cessna Citation Mustang Owner's Likely Upgrade Path

Note: Included in the report are the number and fleet percentage ‘For Sale’ for each of the Top Five upgrade models featured.

 

Will the majority of Citation Mustang owners looking to move up into something larger automatically select the Citation M2 (or other Citation model), or will they be lured away from the Textron/Cessna brand by the Embraer Phenom 100EV and HondaJet? Time will tell, but it’s a trend worth watching.

 

The ‘Upgrade From’ Path

Broadening the study, Table B presents the common ‘Upgrade From’ paths of owners of various Very Light Jet (VLJ) and Entry Level aircraft models (including the Citation Mustang).

 

TABLE B - LIKELY UPGRADE PATHS, BY ENTRY-LEVEL JET MODEL
(per 11/30/17)

Likely Upgrade Paths By Entry Level Jet Model

 

  • Within the table, we can see a high brand loyalty from Embraer Phenom 100 owners upgrading to other Phenom 100 models (including the 100E and 100EV). No Embraer Phenom 100 owners purchased an M2 or a HondaJet.
  • One Citation Mustang owner purchased a HondaJet.
  • Interestingly, one Falcon 100 owner purchased a Cirrus Vision SF50, showing an example of an aircraft owner wanting to move from an older business jet into something new.

 

Business Aircraft Brand Loyalty

Table C and D depict examples of band loyalty with upgrades from Cessna, Falcon, Challenger/Global, Gulfstream and Hawker business jet models. The reports include numbers of owners who upgraded (by make and model) and the business jet they purchased.

 

TABLE C - UPGRADE PATH BY MODEL, BASED ON END-USER TRANSACTIONS
(as of 11/30/17)

Upgrade Path by Model

The ‘Top Five’ reported results show that there is strong brand loyalty among each OEM’s offering. Note, however, that there were seven Challenger 604 owners who moved up to the Gulfstream G550. So these reports also reveal what we will call ‘Take-Away’ from competing OEM brand loyalty.

 

Table D offers an example of two ‘Take-Away’ reports in which owners of other jets upgraded to the Bombardier Global Express and Gulfstream G280. Of course, not all OEMs produce aircraft in all market sectors, and it is worth considering where owners go when staying within brand is not possible.

 

TABLE D - EXAMPLES OF BUSINESS JET OEM 'TAKE-AWAYS'

Examples of Business Jet OEM Take-Aways

Table E offers an overview of the Entry Level category and selected Light business jets. The $3.35m Citation Mustang (highlighted) filled a solid place in the Entry Level jet market with its 479 deliveries. There is a new lower-end of the Light Jet market (weighing above the 10,000 lbs MTOW weight), including the $4.85m HondaJet, the $4.5m Citation M2, the $4.162m Phenom 100 E and the $4.495m Phenom 100 EV.

 

TABLE E - ENTRY-LEVEL & LIGHT JET DATA

Entry Level and Light Jet Move-Up Data

Though we focus on the lower-end of the jet market, JETNET’s upgrade reports cross all market segments, including Turboprops, Light, Medium, Large Cabin business jets and Piston and Turbine Helicopters.

 

The ‘For Sale’ Inventory

Chart A illustrates that the ‘For Sale’ inventory of business jets has decreased steadily from a high-point in July 2009 (2,938) to 2,181 jets in November 2017. That’s a reduction in the percentage of the in-service fleet from 17.7% in July 2009 to 9.9% now.

 

CHART A - USED BUSINESS JET FLEET 'FOR SALE'
(OCTOBER 2007 - DECEMBER 2017)

Used Business Jet Fleet 'For Sale' December 2017

 

This is a positive sign as the inventory ‘For Sale’ has dropped, albeit slowly. Of course, we would hope that the reduced for sale inventory continues to drop in 2018.

 

Today’s market remains good for buyers and sellers because the aircraft ‘For Sale’ inventory is marginally below the 10% mark that traditionally distinguishes a seller’s market from a buyer’s market. If jet owners are retaining their business jets longer since the downturn began in 2008, perhaps that would help explain why the used business jets ‘For Sale’ inventory has remained at such high levels since the Great Recession.

 

The percentage ‘For Sale’ has dropped from 11% in January 2017 to 9.9% at the end of December 2017. Indeed, most business jet dealers and brokers today would tell you that the pristine used jets that were on the market a few years ago have become more challenging to locate.

 

Embraer Phenom 100 EV Business Jet

 

 

In Summary

As illustrated in Chart A, the used business jet inventory has slowly come down since the Great Recession. However, a ‘buyer’s market’ still prevails and transactions are increasing, while business jet prices remain weak. Perhaps now would be a good time to evaluate an upgrade path. One should consider the length of ownership as a reason to change, too.

 

The topic of business jet (or helicopter) move-ups, brand loyalty and ‘take-away’ is very dynamic. It is often very difficult to understand all the thoughts that are generated when an owner decides to sell an existing aircraft, let alone whether they have a need to move-up.

 

The obvious question to answer is whether the business necessitating an aircraft has changed. Does the owner now need more range or seats or faster speeds? If so, which aircraft offers the best solution? The answer to such questions will be unique to each owner, but it is worth their while monitoring the upgrade trends as we have done here by way of preliminary research.

 

 


Read more about: Buying Jets | New Jets to Market | Used Aircraft Sales Trends | Business Aviation Market Analysis

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